Electricity Generation and Retail Corporation trading as Synergy v Woodside Energy Ltd
[2014] WASC 469
•10 DECEMBER 2014
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: ELECTRICITY GENERATION AND RETAIL CORPORATION TRADING AS SYNERGY -v- WOODSIDE ENERGY LTD [2014] WASC 469
CORAM: MARTIN CJ
HEARD: 1 SEPTEMBER 2014
DELIVERED : 10 DECEMBER 2014
FILE NO/S: ARB 6 of 2014
BETWEEN: ELECTRICITY GENERATION AND RETAIL CORPORATION TRADING AS SYNERGY
Applicant
AND
WOODSIDE ENERGY LTD
BP DEVELOPMENTS AUSTRALIA PTY LTD
CHEVRON AUSTRALIA PTY LTD
BHP BILLITON PETROLEUM (NORTH WEST SHELF) PTY LTD
SHELL DEVELOPMENT (AUSTRALIA) PTY LTD
Respondents
Catchwords:
Commercial arbitration - Leave to appeal from arbitrator's decision - Manifest error on the face of the record - Contractual construction - Inadequate reasons - Turns on own facts
Legislation:
Commercial Arbitration 1985 (WA), s 29, s 38
Commercial Arbitration Act 2012 (WA), s 43
Result:
Leave to appeal refused
Category: B
Representation:
Counsel:
Applicant: Mr N J Young QC & Mr S M Davies SC
Respondents : Mr B Dharmananda SC & Mr M Feutrill
Solicitors:
Applicant: Clifford Chance
Respondents : Herbert Smith Freehills
Case(s) referred to in judgment(s):
Alvaro v Amaral [No 2] [2013] WASCA 232
Chan v Cresdon Pty Ltd [1989] HCA 63; (1989) 168 CLR 242
Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Bodycare (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520
D & Z Constructions Pty Ltd v IHI Corporation [2013] WASC 265
Gianfriddo v Garra Constructions Pty Ltd [1971] VR 289
Murray & Roberts Australia Pty Ltd v G B Lifestyles Pty Ltd [2013] WASC 345
Oil Basins Ltd v BHP Billiton Pty Ltd [2007] VSCA 255; (2007) 18 VR 346
Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323
Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37; (2011) 244 CLR 239
MARTIN CJ:
Summary
Electricity Generation and Retail Corporation (the Buyer) applies for leave to appeal from an arbitral award fixing the price at which gas will be sold to the Buyer by Woodside Energy Ltd, BP Developments Australia Pty Ltd, Chevron Australia Pty Ltd, BHP Billiton Petroleum (North West Shelf) Pty Ltd and Shell Development (Australia) Pty Ltd (together the Sellers), pursuant to the provisions of an agreement entitled Sale and Purchase Agreement (the Agreement) which governs the sale and supply of gas from the Sellers to the Buyer. [SUPPRESSED] Leave to appeal is sought on the ground that there are manifest errors of law on the face of the award which, if uncorrected, could substantially affect the Buyer's rights. The manifest errors of law are said to be a misconstruction of a provision in the Agreement which resulted in an erroneous conclusion that the arbitrator had jurisdiction to review and determine the price payable, and a failure to provide adequate reasons for the award in one particular respect in relation to the arbitrator's jurisdiction to review and determine the price payable. For the reasons which follow, there are no errors of law manifest on the face of the award and leave to appeal will be refused.
The applicable law
Clause 7.1 of the Agreement provides that each party is entitled to request a review of the price applicable to gas supplied pursuant to the Agreement from 1 April 2011 (and thereafter every two years) by giving notice to that effect within 30 days after that date. The Sellers served such a notice on 28 April 2011. Clause 7.2 obliges the parties to use reasonable endeavours to agree upon a price following the service of such a notice, and specifies a procedure for the conduct of negotiations between the parties. The clause also provides that if the parties are unable to agree upon a price within five months of the price review date, either party may refer the matter to arbitration within 30 days thereafter.
As the parties were unable to agree upon the price payable during the negotiation period prior to 31 August 2011, by a notice dated 12 September 2011 the Sellers referred the matter to arbitration. The arbitrator was appointed and the hearing of the arbitration conducted prior to the commencement of the Commercial Arbitration Act 2012 (WA) on 7 August 2013, with the consequence that the law governing the arbitration is the Commercial Arbitration Act 1985 (WA) (the Act).[1]
[1] Commercial Arbitration Act 2012 (WA), s 43.
Legal principles - leave to appeal
Section 38 of the Act provides that an appeal lies to this court on any question of law arising out of an award. However, unless all parties to the arbitration agreement consent, an appeal can only be brought with the leave of the court. Section 38(5) of the Act provides that the court is not to grant leave unless it considers that:
(a)having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement; and
(b)there is:
(i)a manifest error of law on the face of the award; or
(ii)strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law.
The Buyer does not contend that the determination of any question of law in the appeal which it wishes to prosecute would add or be likely to add substantially to the certainty of commercial law. It follows that in order to secure the grant of leave, the Buyer must establish that each proposed ground of appeal relates to an error of law which is manifest on the face of the award and which, if uncorrected, could substantially affect its rights.
There is uncontested evidence before the court to the effect that the present value of the difference between the price determined by the arbitrator and the price payable by the Buyer if there is no adjustment in price from the price review date of 1 April 2011 until the anticipated end of the agreement is [AMOUNT SUPPRESSED]. It follows that there is no doubt that the determination of the question of law which is said to go to the jurisdiction of the arbitrator to review and determine the price payable from 1 April 2011 could substantially affect the Buyer's rights. The position is less clear in relation to the ground of appeal which asserts that the arbitrator failed to provide adequate reasons for his award. I will return to this aspect of the application for leave to appeal when specifically considering that ground.
I have previously summarised the principles which I take to govern the grant of leave to appeal under s 38 of the Act in D & Z Constructions Pty Ltd v IHI Corporation:
1.An appeal lies on a question of law 'arising out of an award' (Act, s 38(2)).
2.The subject matter of any appeal is confined to questions of law (Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37; (2011) 244 CLR 239 [27] (Westport Insurance)).
3.The scheme of the Act is to hold parties to their agreement to accept factual findings made by arbitrators (Westport Insurance [27]).
4.In the absence of the consent of all parties to the arbitration agreement, an appeal can only be brought with the leave of the court (Act, s 38(4)).
5.Leave cannot be granted unless the court considers that the determination of the question of law concerned could substantially affect the rights of at least one of the parties to the arbitration agreement, and either:
(a)there is a manifest error of law on the face of the award; or
(b)there is strong evidence that the arbitrator made an error of law and that the determination of the question may add, or may be likely to add substantially to the certainty of commercial law (Act, s 38(5)).
6.The requirement that the error of law be manifest on the face of the award means that it must be apparent to that understanding by a reader of the award (Westport Insurance [42] (French CJ, Gummow, Crennan and Bell JJ), [163] (Kiefel J)).
7.The requirement that the error be manifest on the face of the award does not import a requirement that the error of law have a particular quality or character, so as to include only facile errors, and exclude complex errors (Westport Insurance [45] (French CJ, Gummow, Crennan and Bell JJ), [163] (Kiefel J)).
8.Even if the statutory requirements for the grant of leave are satisfied, the court retains a residual discretion to refuse leave (Westport Insurance [38] (French CJ, Gummow, Crennan and Bell JJ), [165] (Kiefel J)). That discretion will be exercised having regard to 'the rival merits of assured finality on the one hand and upon the other the resolution of doubts as to the accuracy of the legal reasoning followed by the arbitrator' (Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724, 739 (Lord Diplock), cited with approval in Westport Insurance [38]). Other matters to be taken into account when deciding whether leave should be granted (assuming the statutory requirements are satisfied) include the character or quality of the error of law (Westport Insurance [47]), whether the rights of the parties will be substantially affected by the determination of the question of law (Westport Insurance [165]), and all the circumstances of the case (Westport Insurance [29], [165]; Qantas Airways Ltd v Joseland and Gilling (1986) 6 NSWLR 327, 333 (McHugh JA)).[2]
[2] [2013] WASC 265 [2]; approved in Alvaro v Amaral [No 2] [2013] WASCA 232 [25].
In that case I also observed:
There are a number of cases decided prior to the decision of the High Court in Westport Insurance in which observations have been made to the effect that in order to obtain leave on the basis of manifest error of law 'the error of law must be evident and obvious, rather than merely arguable', (Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [2003] VSC 275 [88] (Dodds-Streeton J)), evident 'upon a mere perusal of the reasoned award itself without the benefit of adversarial argument' (The Nema 742 (Lord Diplock) or that '[t]here should … before leave is granted be powerful reasons for considering on a preliminary basis, without any prolonged adversarial argument, that there is on the face of the award an error of law' (Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203, 225 - 226 (Sheller JA)), or that the requirement that the error be manifest 'requires swift and easy persuasion and rapid recognition of the suggested error' (Natoli v Walker (1994) 217 ALR 201, 215 (Kirby P)). There must be considerable doubt as to whether those observations survive the decision of the High Court in Westport Insurance to the effect that the requirement that the relevant error be manifest does not import any particular quality of error, or exclude complex errors, and therefore, implicitly, errors which can only be demonstrated following complex argument. However, it is unnecessary to resolve this issue for the purposes of this case, as the argument advanced for and against the application for leave was relatively constrained.[3]
[3] D & Z Constructions [3].
As will be seen, in this case the arguments advanced for and against the proposition that there is an error of law manifest on the face of the award are detailed and complex. This is not one of those cases in which it could be said that error is apparent from a preliminary view of the award, without requiring any prolonged adversarial argument. It is therefore necessary to address the issue raised by the tension between the decision of the High Court in Westport¸[4] and the earlier authorities to which I referred.
[4] Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37; (2011) 244 CLR 239.
In my view it follows from the observations of the plurality in Westport,[5] to the effect that the requirement for manifest error does not impose any requirement that the error itself has a particular quality or character so as to include facile errors and to exclude complex errors, that observations made in previous cases to the effect that the error must be capable of demonstration by 'swift and easy persuasion' and 'rapid recognition' can no longer be regarded as good law. In this case, neither party contended otherwise.
[5] Westport [45] (French CJ, Gummow, Crennan & Bell JJ); [163] (Kiefel J agreeing).
Legal principles - inadequate reasons
Section 29 of the Act provides that unless the parties to the arbitration agreement agree otherwise (in writing), an arbitrator must include within the award a statement of the reasons for making it. In this case the parties to the arbitration agreement did not agree to vary the effect of the section.
In Oil Basins Ltd v BHP Billiton Pty Ltd,[6] the Court of Appeal of Victoria held that the obligation to provide reasons for an award expressed in substantively identical terms in the corresponding Victorian legislation imported a standard equivalent to that which applied to the reasons given by judges. In Westport the plurality described this decision as having placed an unfortunate gloss upon the terms of the statute.[7] In the view of the plurality, the observations in Oil Basins to the effect that what will be required to satisfy the obligation to provide reasons will depend upon the nature of the dispute and the particular circumstances of the case, were more to the point. Accordingly, 'no wholly satisfactory formula can be found to flesh out the requirement' to provide reasons.[8]
[6] [2007] VSCA 255; (2007) 18 VR 346 [50].
[7] Westport Insurance Corporation v Gordian Runoff Ltd [53] (French CJ, Gummow, Crennan & Bell JJ).
[8] Westport Insurance Corporation v Gordian Runoff Ltd [54] (French CJ, Gummow, Crennan & Bell JJ).
It follows that the question which must be addressed in relation to this aspect of the application for leave to appeal is whether the arbitrator's reasons explain why he arrived at his conclusion, taking into account the nature of the dispute and the circumstances of the case. Having regard to the observations in Westport, it is not possible to state the question in any more definitive terms. If the reasons provided by the arbitrator do not satisfy that requirement, manifest error of law on the face of the award will have been established.[9]
[9] Westport Insurance Corporation v Gordian Runoff Ltd [55] ‑ [57] (French CJ, Gummow, Crennan & Bell JJ).
What is the 'award' for the purposes of s 38?
The portion of s 38(5) applicable in this case requires that the relevant error of law be manifest 'on the face of the award'. I have previously summarised the principles which I take to be applicable to the determination of the ambit of the documents which constitute 'the award' for this purpose in Murray & Roberts Australia Pty Ltd v G B Lifestyles Pty Ltd:
It is trite to observe that the award will include all documents which the arbitrator intended to incorporate into it, and that this intention is assessed objectively - Gold Coast City Council v Canterbury Pipe Lines (Australia) Pty Ltd [1968] HCA 3; (1968) 118 CLR 58, 63; Hodgkinson v Fernie (1857) 3 CBNS 189; Champsey Bhara & Co v Jivraj Balloo Spinning and Weaving CoLtd [1923] AC 480; [1923] All ER Rep 235; NewGeneration Enterprises Pty Ltd v Western Australian Planning Commission [49] (Pullin JA); Zurich Bay Holdings Pty Ltd v Iluka Midwest Ltd [2009] WASC 237 [15].
A number of factors will influence whether the documents sought to be relied upon by Murray & Roberts were intended by the arbitrator to have been incorporated into the award. If the arbitrator's reasons cannot be understood without reading the document, the reasons will be regarded as incorporating the document - NewGeneration Enterprises Pty Ltd v Western Australian Planning Commission [49] (Pullin JA); Alvaro v Temple [2009] WASC 205 [37]; Zurich Bay Holdings Pty Ltd v Iluka Midwest Ltd [16]; Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [2003] VSC 275 [49]; RP Robson Constructions v D & M Williams (1989) 6 BCL 219, 222; Ukrainian Association of Western Australia in Perth (Inc) v Squire Constructions Pty Ltd [2004] WASC 4 [25]. Put another way, if the decision or direction given is in terms which mean that it is not possible to understand what has been decided or directed without reference to another document, that document should be treated as incorporated into the award - Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [45] (Dodds-Streeton J); Gianfriddo v Garra Constructions Pty Ltd [1971] VR 289, 290 - 291 (Smith J).
However, a mere recital or narrative statement referring to a document will be insufficient to incorporate the document into the award - Ukrainian Association of Western Australia in Perth (Inc) v Squire Constructions Pty Ltd [25]; Zurich Bay Holdings Pty Ltd v Iluka Midwest Ltd [16]; Gianfriddo v Garra Constructions Pty Ltd; City of Canning v Avon Capital Estates (Australia) Ltd [60].
…
The notice of reference to arbitration should be taken to be incorporated into the award. In W J Alan & Co Ltd v El Nasr Export & Import Co [1971] 1 Lloyd's Rep 401, Orr J confirmed 'that as regards an interim award the court is always entitled to look at the relevant documents to see what was submitted to arbitration' (408). This passage was cited with approval by Dodds-Streeton J in Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [46], and Applegarth J in Discovery Beach Project Pty Ltd v Northbuild Construction Pty Ltd [2011] QSC 306 [78].[10]
[10] Murray & Roberts Australia Pty Ltd v G B Lifestyles Pty Ltd [2013] WASC 345 [39] ‑ [41], [43].
There is no general rule to the effect that the entirety of the agreement containing the relevant arbitration agreement is to be taken to be incorporated into the award.[11] Whether or not the entirety of the Agreement is taken to be incorporated will depend upon the particular circumstances of the case, and upon the terms of the award. If the reasoning expressed in the award relies to some extent upon inferences of intention or purpose to be derived from the Agreement as a whole, the entire agreement will generally be taken to be incorporated into the award.[12] In this case, at a number of points in the award, the arbitrator drew conclusions with respect to the commercial purpose of the agreement and the intention to be attributed to the parties from the words they have used in the Agreement construed in the context of the Agreement as a whole. The parties are agreed that this is one of those cases in which the entire Agreement should be taken to be incorporated into the award and can therefore be viewed in its entirety for the purpose of ascertaining whether error of law is manifest 'on the face of the award'. I share that view.
[11] Murray & Roberts Australia Pty Ltd v G B Lifestyles Pty Ltd [48] ‑ [49].
[12]Gianfriddo v Garra Constructions Pty Ltd [1971] VR 289, 290 - 291 (Smith J).
The parties are agreed that the reference to arbitration, the entirety of the Agreement, and the arbitrator's reasons for his award are to be incorporated into the award and can all be considered for the purposes of ascertaining whether error of law has been established.
In its written submissions, the Buyer foreshadowed the tender of a number of additional documents which were said to be incorporated within the award, including a statement of agreed facts which had been provided to the arbitrator, the pleadings in the arbitration, the outlines of written submissions, some of the documentary evidence tendered during the course of the arbitration hearing [SUPPRESSED].
I rejected the tender for reasons which I expressed shortly.[13] In my view, there is a clear inference from the terms of the award as a whole that the arbitrator intended to include within the award itself all information necessary for an appreciation of the reasons for his award, other than the Agreement itself. [SUPPRESSED]
[13] ts 70.
Conclusion
The Buyer has failed to establish any error of law manifest on the face of the award. The application for leave to appeal must be refused.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION: ELECTRICITY GENERATION AND RETAIL CORPORATION TRADING AS SYNERGY -v- WOODSIDE ENERGY LTD [2014] WASC 469 (S)
CORAM: MARTIN CJ
HEARD: ON THE PAPERS
DELIVERED : 17 APRIL 2015
FILE NO/S: ARB 6 of 2014
BETWEEN: ELECTRICITY GENERATION AND RETAIL CORPORATION TRADING AS SYNERGY
Applicant
AND
WOODSIDE ENERGY LTD
BP DEVELOPMENTS AUSTRALIA PTY LTD
CHEVRON AUSTRALIA PTY LTD
BHP BILLITON PETROLEUM (NORTH WEST SHELF) PTY LTD
SHELL DEVELOPMENT (AUSTRALIA) PTY LTD
Respondents
Catchwords:
Costs - Special costs orders - Proper construction of s 280(2) of the Legal Profession Act 2008 (WA) - Meaning of 'matter' - Adjectives 'unusual difficulty, complexity or importance' qualify entire issue, dispute or controversy rather than individual items in applicable costs determination
Costs - Special costs orders - Whether matter of unusual difficulty, complexity or importance - Turns on own facts
Costs - Special costs orders - Appropriate form of orders - Unreasonable position on costs to occasion costs order on indemnity basis
Legislation:
Australian Constitution, s 73, s 75, s 76, s 77
Commercial Arbitration Act 1985 (WA)
Judiciary Act 1903 (Cth), s 2
Legal Profession Act 2008 (WA), s 280(2)
Supreme Court Act 1935 (WA), s 4
Result:
Application for special costs order granted
Costs of application to be part of proceedings generally
Category: A
Representation:
Counsel:
Applicant: No appearance
Respondents : No appearance
Solicitors:
Applicant: Clifford Chance
Respondents : Herbert Smith Freehills
Case(s) referred to in judgment(s):
Electricity Generation and Retail Corporation trading as Synergy v Woodside Energy Ltd [2014] WASC 469
Heartlink Ltd v Jones as Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S)
Mentha as Receiver and Manager of Westgem Investments Pty Ltd (in liq) v Hughes as Liquidator of Westgem Investments Pty Ltd (in liq) [2014] WASC 478 (S)
Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd [1981] HCA 7; (1981) 148 CLR 457
Pourzand v Telstra Corporation Ltd [2012] WASC 210 (S2)
MARTIN CJ:
Summary
On 10 December 2014 I published my reasons[14] for concluding that leave to appeal from an arbitral award fixing the price at which gas will be sold to Electricity Generation and Retail Corporation (the Buyer) by Woodside Energy Ltd and others (the Sellers) should be refused, although it has been necessary to suppress general publication of a large part of my reasons in order to preserve various matters of commercial confidence involving not only the parties to these proceedings, but other participants in the market for the sale of gas. At the time I published my reasons I ordered that the Buyer pay the Sellers' costs of the proceedings to be taxed if not agreed, granted liberty to apply for any particular orders with respect to the costs of the proceedings, provided a timetable for the exercise of that liberty, and ordered the exchange of evidence and written submissions in the event that the liberty was exercised.
[14] Electricity Generation and Retail Corporation trading as Synergy v Woodside Energy Ltd [2014] WASC 469 (Reasons).
The Sellers have exercised that liberty and seek various orders pursuant to s 280(2) of the Legal Profession Act 2008 (WA) (the Act), the general effect of which would be to permit the taxing officer to award costs without being limited by the applicable costs determinations in respect of the general hourly rates for particular classes of practitioner, the maximum amounts specified in respect of various items, or the maximum hours specified in relation to those items. For the reasons which follow, orders should be made in the terms generally (but not precisely) sought.
General principles
I have set out the general principles which I take to govern the exercise of the powers conferred upon the court by s 280(2) of the Act on a number of occasions.[15] I adhere to those views which are unnecessary to repeat in these reasons.
[15] Heartlink Ltd v Jones as Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) [11] ‑ [21]; Mentha as Receiver and Manager of Westgem Investments Pty Ltd (in liq) v Hughes as Liquidator of Westgem Investments Pty Ltd (in liq) [2014] WASC 478 (S) [4] ‑ [5], [9].
Despite the observations which I made in Heartlink with respect to the desirability of discouraging parasitic litigation relating to costs, recent years have seen increasing enthusiasm for litigation of that kind. For that reason I reiterate that once an order is made for the taxation of costs, it is not appropriate for the court to usurp the function of the taxing officer. Rather, under s 280(2) of the Act, the function of the court is limited to setting the parameters within which the taxing officer will tax the relevant bill, providing any specific directions which will assist the taxing officer to assess the quantum of the costs to be allowed on taxation. Because the quantum of costs to be allowed is to be determined by taxation, the powers conferred upon the court by s 280(2) of the Act are to be exercised as matters of impression rather than science, taking into account the greater expertise of taxing officers in fixing the amount of costs properly and reasonably allowed.
Implicit[16] in the observations which I made in Heartlink and Mentha is the proposition that the 'matter' which must be unusually difficult, complex or important in order to enliven the jurisdiction conferred by s 280(2) is the whole of the 'matter' in respect of which legal services were provided and which comes within the scope of a legal costs determination made by the Legal Costs Committee pursuant to pt 10 div 5 of the Act. However, in Pourzand v Telstra Corporation Ltd, Edelman J observed:[17]
The approach sometimes taken to special costs orders, including the approach taken in this case, is to consider whether the whole of the litigation was of unusual difficulty, or complexity, or importance. This is not the correct approach. The question should be asked separately in relation to each item for which the lifting or removal of the Scale is sought. The words of s 280 refer to the inadequacy of the amount of costs allowable 'in respect of a matter under a costs determination' because of the unusual difficulty, complexity or importance 'of the matter'. Section 280 does not contemplate a usual course of removing all limits because of unusual difficulty, complexity or importance. It focuses attention upon particular items.
An application for special costs orders does not require lengthy evidence or submissions on an individual matter of costs. In some cases the same factors of unusual difficulty, or complexity, or importance will apply to all factors for which a lifting of the Scale is sought. But it is possible that an individual matter in litigation might be unusually difficult, or complex, or important, even if the litigation itself is not, or vice versa.
[16] If not explicit.
[17] Pourzand v Telstra Corporation Ltd [2012] WASC 210 (S2) [24] ‑ [25].
In my respectful view, these observations are inconsistent with the natural and ordinary meaning of the words used in s 280(2), and with prior decisions of the court, including the decisions to which I have referred, and are also inconsistent with long‑established practice. For the reasons which follow, in my respectful view those observations are wrong and I do not propose to apply them in this case.
The reasoning of Edelman J depends upon the proposition that the expression 'a matter under a costs determination' should be construed as meaning 'a specific item within a costs determination'. However, there are four reasons why, in my respectful view, that expression should be construed as meaning the issue, dispute or controversy in respect of which legal services were provided and which fall within the ambit of a costs determination made by the Legal Costs Committee pursuant to the provisions of the Act.
First, if the legislature had intended that the requirements of unusual difficulty, complexity or importance were to be applied in respect of each and every item within an applicable costs determination, rather than to the issue, dispute or controversy in respect of which the legal services were provided, language apt to produce that result would have been used. However, there are no words within the subsection which suggest that the court is required to assess the difficulty, complexity or importance of the work done in respect of each and every item in the relevant determination before exercising the power conferred by s 280(2). The natural and ordinary meaning suggested by the words used is that the 'matter' is the matter in respect of which legal services were provided.
Second, the powers conferred upon the court by s 280(2) are not limited to powers relating to a single or specific item in any determination, but are expressed in much broader and more general terms, namely to:
(a)order the payment of costs above those fixed by the determination;
(b)fix higher limits of costs than those fixed in the determination;
(c)remove limits on costs fixed in the determination;
(d)make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.
The breadth of the powers conferred upon the court strongly suggests that it was not the intention of the legislature that the powers had to be exercised individually in respect of each and every specific item in any determination, and then only if the work done in respect of that particular item could be characterised as unusually difficult, complex or important.
Third, the word 'matter' has a recognised meaning when used in the context of legal controversies or, as in this case, in the context of the provision of legal services. It is a word which is used in these contexts in many statutes, including the Supreme Court Act 1935 (WA),[18] the Australian Constitution[19] and the Judiciary Act 1903 (Cth).[20] There have been many cases in which the precise meaning of the word has been considered in these contexts, including the line of cases dealing with the boundaries between federal and state jurisdiction.[21] Although it is perhaps theoretically possible that the powers conferred by s 280(2) of the Act might be used in respect of the taxation of a bill between a practitioner and client in respect of non‑contentious business covered by a costs determination, conferral of the discretion upon a court or judicial officer suggests that the legislation contemplated that the power would generally be exercised in the context of contentious business before the relevant court - that being the 'matter' falling within the jurisdiction of the court in the sense of the issue, dispute or controversy litigated. There is nothing in the language of s 280(2) of the Act read in the context of the Act as a whole which would suggest that the legislature did not intend the word 'matter' to bear this well‑established meaning.
[18] Section 4.
[19] See, eg, s 73, s 75, s 76 and s 77.
[20] Section 2.
[21] See, as an example of many, Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd [1981] HCA 7; (1981) 148 CLR 457, 473 ‑ 476 (Barwick CJ), 491 ‑ 492 (Gibbs J), 507 ‑ 515 (Mason J), 519 ‑ 520 (Murphy J), 531 ‑ 533 (Aickin J).
Fourth, the adjectival qualities of difficulty, complexity or importance have a ready meaning and application when applied to the issue, dispute or controversy litigated before the court exercising the power conferred by s 280(2). It is more difficult to see how those qualities or characteristics have any ready or sensible application to any of the multitude of individual items within a costs determination. So, the proposition that, for example, some controversies brought before the court may have greater or less importance than others is readily comprehensible. However, if the judicial resolution of that controversy is properly characterised as 'important' in the sense in which that word is used in s 280(2) of the Act,[22] it is much more difficult to comprehend how particular items within a costs determination applicable to legal services provided in relation to that controversy could be said to be more or less important than others. That is because, generally speaking, all legal services provided with respect to that 'matter' should be provided with the same degree of care and diligence appropriate to the importance of the 'matter' as a whole.
[22] See Heartlink [17] ‑ [19].
Of course, this approach to the proper construction of s 280(2) of the Act does not mean that a court exercising the powers conferred by that subsection is not required to consider potentially applicable items in a relevant costs determination. To the contrary, such matters must be considered because, before the powers conferred by the subsection can be exercised, the court must form the opinion that the amount of costs allowable under the costs determination is inadequate because of the unusual difficulty, complexity or importance of the 'matter'. So, while there must be a causal connection between the unusual difficulty, complexity or importance of the issue, dispute or controversy brought before the court, and the inadequacy of the costs allowable under the relevant determination, the adjectival characteristics of unusual difficulty, complexity or importance qualify the issue, dispute or controversy before the court, rather than the work done or services provided in respect of each applicable item of the costs determination. The question which must be addressed either in respect of individual items or a costs determination as a whole is whether the costs allowable in respect of the work done are inadequate because of the particular characteristic or characteristics of the 'matter' which has or have enlivened the jurisdiction of the court - that is, unusual difficulty, complexity or importance.
Was this case unusually difficult, complex or important?
Given the preceding discussion, it is convenient to close off this aspect of the Sellers' application before considering the precise orders which they seek. For the reasons I have given, this aspect of the Sellers' application requires the court to determine whether the Buyer's application for leave to appeal from the arbitral award can be properly characterised as unusually difficult, complex or important.
I have no hesitation in concluding that the application for leave to appeal from the arbitral award had each of these characteristics, although it is difficult to enunciate the reasons for that conclusion without reference to those (substantial) parts of my reasons which have been suppressed for reasons of commercial confidentiality. It is sufficient for present purposes to note that in the portion of my reasons which have not been suppressed, I described the arguments which had been advanced as 'detailed and complex'.[23] The arguments related to the proper construction of a number of provisions in a complex commercial agreement, as well as findings by the arbitrator as to how those provisions applied to other complex commercial arrangements. In addition to these complexities, the language used in the agreement created some unusual difficulties. On the question of importance, I noted in my published reasons that evidence was presented with respect to the present value of the difference between the price determined by the arbitrator and the price payable by the Buyer if there was no adjustment in price from the price review date until the anticipated end of the agreement, although I suppressed publication of the amount established by that evidence. For present purposes it is sufficient to observe that the amount established by the evidence was very substantial, leaving me in no doubt that the resolution of the application for leave to appeal from the award was extremely important to the parties.
[23] Reasons [9].
The orders sought
In addition to seeking the costs of this application, the Sellers seek orders which would have the effect of:
(a)removing the maximum allowable hourly rates fixed under Table A;
(b)removing the maximum amounts fixed for time and total costs under Items 23(b), (e), (f), (g), (h), (i), (j), (k), (l) and 33 of Table B; and
(c)directing that the amounts to be allowed in respect of Items 23(b), (e), (f), (k) and (l) of Table B be taxed on the basis of work undertaken by more fee earners than those specified in the relevant item
in respect of whichever of the 2012 or 2014 Determination applied to those items.[24]
[24] Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 and Legal Profession (Supreme Court) (Contentious Business) Determination 2014 - the former applying to all work done between 1 November 2012 and 30 June 2014; the latter applying to all work done from 1 July 2014 onwards.
In accordance with the general principles to which I have referred, orders to the effect sought can only be made if I am satisfied that there is a fairly arguable case that the costs that would be properly allowed by the taxing officer in respect of the particular items to which reference is made would exceed the amounts allowable under the relevant determination, because of the unusual difficulty, complexity or importance of the matter before the court. The Sellers rely upon evidence to support this aspect of their case, which I will briefly summarise.
The evidence in support of the application
The Sellers rely upon an affidavit sworn by one of their solicitors, who has conducted a detailed review of the invoices issued to the Sellers for work done by their solicitors and counsel in relation to the Sellers' opposition to the application for leave to appeal. The review excluded work done in relation to advising and receiving instructions from the Sellers, conferring with entities whose documents had been subpoenaed for the purposes of the arbitration, and administering the confidentiality regimes applicable to both the arbitral proceedings and the application for leave to appeal.
Following her review of the relevant invoices, the practitioner has deposed to the average hourly rates charged by the classes of practitioner to which reference is made in Table A of the relevant costs determinations. In the case of practitioners falling within classes of senior counsel, junior counsel and senior practitioners, the rates actually charged to the Sellers substantially exceed the maximum allowable rates specified in the table. In the case of junior practitioners, the average rate actually charged marginally exceeds the maximum allowable hourly rate specified in the table.
The practitioner also deposes to the hours of work and number of practitioners involved in performing the work applicable to each of the paragraphs in Item 23 of the determinations in respect of which orders are sought. So, in the case of Item 23(b) (respondent's answer in an appeal) of the 2012 Determination,[25] for which the maximum allowable time is 40 hours work of senior counsel, the Sellers were charged for 287.6 hours of the time of two senior counsel, 125.5 hours of two junior counsel, and 157.6 hours of the time of three senior practitioners and two junior practitioners working with the Sellers' counsel. The total amount charged to the Sellers for work applicable to Item 23(b) was $485,630.30, whereas the maximum allowable amount under the mostly applicable 2012 Determination is $25,520.
[25] The 2012 Determination applied for the period in which work was done in respect of Item 23(b), except for 4 days between 1 July 2014 and 4 July 2014 when the 2014 Determination would apply.
In relation to Item 23(e), which relates to the work done in connection with a directions hearing before me on 20 June 2014, the Sellers were charged for 20 hours of work done by one senior practitioner, one junior practitioner, one senior counsel and one junior counsel in the total amount of $11,288.15, which exceeds the maximum allowable time of 10 hours of junior counsel and the maximum allowable total of $3,630, those being the maxima allowable under the applicable 2012 Determination.
In relation to Item 23(f), which concerns the preparation of a case for appeal hearing, the practitioner deposes that the Sellers were charged $105,169.57 for 193.5 hours of time spent by three senior practitioners and two junior practitioners preparing the matter for hearing. Under the applicable 2014 Determination, the maximum allowable amount equates to 10 hours of the time of a senior practitioner, totalling $4,730.
The affidavit sworn by the practitioner provides similar data in relation to the work done in respect of other items falling within particular paragraphs of Item 23 of the applicable costs determination. It is unnecessary to provide those details in these reasons. It is sufficient for present purposes to observe that, consistently with the details I have already set out in respect of pars (b), (e) and (f) of Item 23 of the applicable determination, in each case the Sellers have been charged a greater amount than the maximum total allowable under the relevant determination, as a result of more practitioners than those allowable having worked for hours longer than the maximum hours allowable and charged at hourly rates higher than those allowable under items of the relevant determination. The extent to which the services provided to the Sellers, and the charges rendered to them, exceed the maxima allowable under the relevant item varies from item to item but, generally speaking, is of the order of magnitude to which I have referred above.
The Buyer's submissions
In summary, the Buyer submits that:
(a)consistently with the observations of Edelman J in Pourzand, the court must determine whether the work done in respect of each item in the determination in respect of which orders are sought was unusually difficult, complex or important;
(b)the evidence upon which the Sellers rely establishes only that they were charged at hourly rates greater than the maxima allowable under the relevant determinations, for hours greater than the maxima allowable in respect of work done by a greater number of practitioners than is allowable, thereby giving rise to a total charge greater than the maxima allowable, and does not establish the causal connection between the unusual difficulty, complexity or importance of the work done and the inadequacy of the relevant items in the applicable determination;
(c)the application for leave was not complex because it involved 'well settled' areas of law, including the principles governing leave to appeal under the Commercial Arbitration Act 1985 (WA) and the proper construction of provisions of the long-term agreement between the parties, and it was not the first time the Sellers were required to consider and prepare submissions with respect to the latter issue; and
(d)in relation to particular items, the hours claimed and work done was excessive and unjustified.
Disposition
Dealing with each of these propositions in turn, it was, of course, reasonable for the Buyer to make submissions based upon the reasons of Edelman J in Pourzand. However, for the reasons I have given, I do not accept that the proper construction of s 280(2) of the Act requires the approach taken in that case.
The submission that the evidence upon which the Sellers rely fails to establish the requisite causal connection between the unusual difficulty, complexity and importance of the work done and the inadequacy of the amount allowable under the relevant determination must be evaluated in a context in which the Buyer was represented on the application for leave to appeal by two senior counsel and a junior counsel who were instructed by three practitioners. Although I have no evidence as to the amounts charged by those practitioners to the Buyer, the eminence of leading senior counsel for the Buyer and the ambit of the arguments presented in support of the application is such that I can readily infer, and do infer, that it is most unlikely that charges to the Buyer would have been rendered by reference to the maximum amounts allowable under the relevant items in an applicable determination.
The Buyer asserts that the Sellers 'appear to have spared no expense in the presentation of their case and have left no stone unturned'. That assertion applies with equal force to the Buyer's approach to this case. It is apparent from the evidence I have received, and from my observations during the course of the hearing, that each of the Buyer and the Sellers have chosen to engage eminent senior and junior counsel and to utilise the services of a significant number of senior and junior practitioners in large commercial law firms each of which has an international connection. Contrary to the Buyer's submission, it is quite obvious that each of the parties made decisions to engage legal practitioners with that level of expertise and to require services of that magnitude because of the unusual difficulty, complexity and importance of the application for leave to appeal. The submission to the contrary is spurious, and should never have been made.
The same observation can be made with respect to the Buyer's submission that the issues involved were not complex. That submission is contrary to my express finding in the published reasons and to the complexity of the arguments advanced by the Buyer in support of its application. It is entirely inconsistent with the Buyer's decision to retain leading senior and junior counsel, and with the decision to secure the services of a significant number of practitioners within a leading commercial law firm.
The Buyer's submissions with respect to the work done and hours claimed in respect of particular items within the relevant costs determinations are of a kind appropriately made to the taxing officer. For the purposes of exercising the powers conferred by s 280(2) of the Act, it will not ordinarily be necessary for the court to determine what amount should be allowed on taxation, but only whether there is a fairly arguable case that a greater amount should be allowed than that which is allowable under the relevant determination. A fairly arguable case to that effect will not be established merely because a party incurred greater costs than those allowable under the relevant determination. However, in this case the fact that each party applied significantly greater legal resources to each step in the litigation than those for which allowance is made under items of the relevant determinations, when viewed in the context of the difficulty, complexity and importance of the matter, amply sustain the conclusion that there is a fairly arguable case that each of the items in the determinations identified by the Sellers are inadequate because of the unusual difficulty, complexity and importance of the case.
Conclusion
In this case the complexity of the issues litigated, the financial significance of those issues to the parties and the nature and magnitude of the legal resources applied by each party to the litigation leave no room for any doubt whatsoever that an order under s 280(2) of the Act is appropriate. I have no doubt that if the Buyer had been successful it would have applied for orders in similar terms to those now sought by the Sellers, given the legal resources which it utilised. The Buyer's opposition to the orders sought by the Sellers was pointless, and in the respects I have identified, unreasonable. The unreasonable position adopted by the Buyer has put all parties to expense and necessitated the deployment of the limited and publicly-funded resources of the court. I have already mentioned the desirability of discouraging parasitic litigation of this kind. In future cases, that interest will be advanced by ordering parties who adopt unreasonable positions with respect to costs to pay the costs occasioned by that stance on an indemnity basis. However, as the Sellers have not sought such an order in this case, and the Buyer has not been put on notice of its risk in relation to such an order, I will not make such an order in this case, although I will order that the Sellers' costs of this application be included within the costs of the proceedings generally, with the result that they will be borne by the Buyer.
The appropriate orders
One of the orders sought by the Sellers is a direction to the effect that the taxing officer tax five specified sub-items within Item 23 of the relevant costs determination by making allowance for work undertaken by more than the number of fee earners specified in the relevant sub‑item. While there will be cases in which the court can assist the taxing officer by making directions with respect to the nature of the legal services justified by the issues in the case, generally speaking, the greater experience of taxing officers in relation to such matters makes it more appropriate for the court to merely direct that the bill be taxed without limitations imposed by the maxima specified in the relevant items within the applicable determination, leaving it to the taxing officer to determine whether in fact an award of costs reflecting a greater amount, or a greater number of hours, or a greater number of fee earners than those allowed in the determination is justified. So, in this case, I would not propose to direct that the taxing officer make allowance for work undertaken by a greater number of fee earners than those specified in the relevant items in the applicable determination, but rather to make orders which will allow the taxing officer to award costs reflecting the provision of services by a greater number of practitioners than those allowed in the relevant item if he or she considers such an award to be justified. So, the orders will be:
1.The Sellers' costs of these proceedings are to be taxed without limitations imposed by the maximum allowable hourly rates fixed under Table A or the maximum allowances for time, number and experience of fee earners or total costs under Items 23(b), (e), (f), (g), (h), (i), (j), (k), (l) and Item 33 of Table B of the relevantly applicable legal costs determination.
2.The Sellers' costs of this application are to be included within the Sellers' costs of the proceedings.
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